Executive Pay: A socially-oriented distributive justice framework

This paper presents an alternative to the market-oriented approach to executive pay. The pay for performance requirement and shareholder ‘say-on-pay’ have not worked as a corporate governance formula for controlling levels of pay for directors of large public companies. The financial press continues to report “excessive” payments. An ethical, socially-oriented distributive justice framework is necessary. This paper explains the problems with the market justice approach and suggests that we need to consider the social and political implications of a growing wealth and income gap. This leads to a different set of requirements that are much broader than pay-for-performance and shareholder power. If the framework is adopted this could lead to an improved corporate governance system as well as a more equal and inclusive society.